* Lower oil prices drag on energy shares
* Worse-than-expected housing data adds to caution
* Lehman plummets on capital raising concerns
* Dow of 0.7 pct, S&P 500 off 1.3 pct, Nasdaq off 0.6 pct
(Updates to late morning)
By Ellis Mnyandu
NEW YORK, Sept 9 U.S. stocks fell on Tuesday as
a drop in oil prices dragged down shares of energy companies
and investors worried anew about the economy's health and
prospects for the financial sector.
A report showing a steeper-than-expected drop in pending
sales of existing U.S. homes in July added to the negative
Shares of energy shares fell in sync with a drop in crude
oil prices, down $2.19 at $104.12 a barrel, with Exxon Mobil
Corp (XOM.N) the top drag on the S&P 500.
On the financial services front, shares of Lehman Brothers
LEH.N fell more than 30 percent as investors worried about
the investment bank's ability to raise capital amid mounting
Shares of both financial companies and home builders,
meanwhile, fell as the euphoria faded over the government's
bailout of home financiers Fannie Mae FNM.N and Freddie Mac
"The bailout of Fannie Mae and Freddie Mac was not an
all-clear," said Alan Lancz, president of Alan B. Lancz &
Associates Inc, an investment advisory firm based in Toledo,
Ohio. "Reality is setting in that it's not only the U.S. Europe
is even in the worst shape, you've also got a slowdown in
The Dow Jones industrial average .DJI fell 82.89 points,
or 0.72 percent, to 11,427.85. The Standard & Poor's 500 Index
.SPX dropped 16.84 points, or 1.33 percent, to 1,250.95. The
Nasdaq Composite Index .IXIC declined 14.13 points, or 0.62
percent, to 2,255.63.
Investors sold off shares of big manufacturers, including
Caterpillar (CAT.N), down nearly 3 percent, and 3M Co (MMM.N),
which fell more than 2 percent. Both companies are among
bellwethers whose prospects hinge on demand both from within
the United States and abroad.
Shares of Exxon fell 1.1 percent to $75.92 on the New York
American International Group (AIG.N) ,the world's biggest
insurer, was the second biggest drag on the S&P 500, down 9.2
percent at $20.69.
Lehman shares were down at $9.85 on the NYSE, while the S&P
financial index .GSPF shed 3.4 percent. State-owned Korean
Development Bank on Tuesday declined to comment on its talks
with Lehman over a possible investment.
Todd Leone, head of listed trading at Cowen & Co in New
York said Lehman was playing a big part in the market's slide.
"Financials are taking a hit because of it," he said.
"Lehman's been rumored to be in trouble for a while, and people
were hoping the Koreans might bail them out, but now they're
not sure that's going to happen."
Among home builders, shares of luxury home builder Toll
Brothers (TOL.N) dropped 5.1 percent at $25.12, while the Dow
Jones home construction index .DJUSHB was off 5.6 percent.
Credit Suisse cut its rating on home builders to market weight
from overweight, according to theyflyonthewall.com
The National Association of Realtors Pending Home Sales
Index, based on contracts signed in July, was down 3.2 percent
to 86.5 from an upwardly revised index of 89.4 in June. For
details, see [ID:nN09262357].
Caterpillar shares fell to $62.40, and 3M shares dropped to
On Nasdaq, shares of chip maker Intel (INTC.O) were a top
drag, down more than 2 percent at $20.52. Technology companies
are among sectors seen most vulnerable to a global economic
(Additional reporting by Steven C. Johnson; Editing by Leslie